The financial sector isn't the powerhouse of the UK economy. It's more like a Wendy house

HMRC figures show a drastic reduction in Corporation Tax contributions since the financial crash – on average just £3.3billion a year, even when the paltry Bank Levy is included. To put this in context, the finance sector shelled out £14 billion in bonuse

Five years ago today, following a frantic weekend of negotiations, during which Alistair Darling later admitted cash machines were within hours of being switched off, the Government announced that British banks would be part-nationalised to stave off collapse. We bought an 82% stake in RBS and 40% in Lloyds/HBOS at a combined cost of £37 billion. 

It was part of a wider bailout package which cost £132.89 billion of public money – the equivalent of £2,000 from each man, woman and child in the UK. Former Governor of the Bank of England Mervyn King quipped a year later: "To paraphrase a great wartime leader, never in the field of financial endeavour has so much money been owed by so few to so many.”

Half a decade later and the situation has changed little. According to the most up-to-date figures from the National Audit Office, £118.86 billion (or 89 per cent) of the original bailout is still outstanding. The interest payments alone cost the public purse £5 billion a year. Whilst some of the costs are recouped through the Government charging banks interest and fees, the NAO estimates it has still amounted to “a transfer of at least £5 billion from taxpayers to the financial sector” since the crisis.

There are others reasons the many are still propping up the few. Take for instance the 'too-big-to-fail' subsidy, whereby banks can borrow money cheaply because creditors know the Government (read: taxpayer) will bail them out if things go wrong. It's worth a fortune - £235 billion to Britain's four biggest banks between 2008-2011, according to research by the New Economics Foundation.

Or look at financial service's incongruous exemption from VAT. It's understandable that some items are VAT-free, for example: children's clothes, public transport, medical and funeral costs; but why are we exempting the services of a derivatives trader? According to HMRC itself, this anomaly costs us another £5bn a year. The International Monetary Fund has warned this special treatment of the banking sector means it is under-taxed and has allowed it to grow “too large”. 

Banks have also become adept at gobbling up public money intended for the real economy. This not only artificially inflates their profit and pay, but acts as a tourniquet on growth. Despite having drawn down £17.6bn since the Funding for Lending Scheme began just over a year ago, banks' lending to business contracted by £2.3bn.  

The cumulative effect is that banks live in a welfare dependent bubble, cushioned from feeling the effects of the crisis they caused. Financial sector growth has far outstripped the rest of the economy since the crisis: in 2012 for example, if you take out the fines and the one-off costs of adjusting to regulatory changes, the profits of the five biggest banks' rose 45% to £31.5 billion. The economy virtually flat-lined during the same period.

Yet whilst the financial sector likes to think of itself as the powerhouse of the UK economy, in terms of the tax it pays, it's more of a Wendy house. HMRC figures show a drastic reduction in Corporation Tax contributions since the financial crash – on average just £3.3billion a year, even when the paltry Bank Levy is included. To put this in context, the finance sector shelled out £14 billion in bonuses to top staff last year alone.

Meanwhile, the public have paid in service cuts, job losses and tax rises. Government spending will be cut by 9.1%, £141bn in real terms, during the course of this Parliament, chronically impacting on the poorest who rely on services most. Whilst the top rate of tax was cut, giving millionaires a tax break, the VAT increase to 20% has been shown to hit the poorest 10 per cent of the population more than twice as hard as the richest 10 per cent.

This stark injustice has prompted other countries to take action. It is the explicit reason why Germany, France, Italy, Spain and seven other European countries are implementing the Financial Transaction Tax of between 0.1% - 0.01% on stocks, bonds and derivatives that will raise up to £30 billion. It is the only policy to have emerged post-crisis that will ensure those responsible pay to clean up the mess they caused.

Unfortunately, the UK Government has not only refused to join in, but has taken the proposal to the European Court of Justice. It's a worrying indictment of their priorities, compounded two weeks ago when they launched another legal challenge, this time against the EU banker bonus cap. This was followed by news that the Government is scrapping the 1 per cent pay rise due to NHS staff in April. As an example of misplaced priorities it is difficult to beat.

Unless of course you look at ministers’ treatment of the poorest – the bedroom tax, benefit cap and punitive sanctions for those who miss Job Centre appointments - these policies are all signs that the coalition is determined to end what they call ‘the something for nothing’ culture. It’s a shame they won’t apply the same logic to bankers.

A protestor from the 'Robin Hood Tax Campaign,' dressed as 'Robin Hood,' holds a fake budget box above the Houses of Parliament. Image: Getty

Simon Chouffot is a spokesperson for the Robin Hood Tax campaign and writes on the role of the financial sector in our society.

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Let's seize our chance of a progressive alliance in Richmond - or we'll all be losers

Labour MPs have been brave to talk about standing aside. 

Earlier this week something quite remarkable happened. Three Labour MPs, from across the party’s political spectrum, came together to urge their party to consider not fielding a candidate in the Richmond Park by-election. In the face of a powerful central party machine, it was extremely brave of them to do what was, until very recently, almost unthinkable: suggest that people vote for a party that wasn’t their own.
Just after the piece from Lisa Nandy, Clive Lewis and Jonathan Reynolds was published, I headed down to the Richmond Park constituency to meet local Green members. It felt like a big moment – an opportunity to be part of something truly ground-breaking – and we had a healthy discussion about the options on the table. Rightly, the decision about whether to stand in elections is always down to local parties, and ultimately the sense from the local members present was that it would be difficult  not to field a candidate unless Labour did the same. Sadly, even as we spoke, the Labour party hierarchy was busily pouring cold water on the idea of working together to beat the Conservatives. The old politics dies hard - and it will not die unless and until all parties are prepared to balance local priorities with the bigger picture.
A pact of any kind would not simply be about some parties standing down or aside. It would be about us all, collectively, standing together and stepping forward in a united bid to be better than what is currently on offer. And it would be a chance to show that building trust now, not just banking it for the future, can cement a better deal for local residents. There could be reciprocal commitments for local elections, for example, creating further opportunities for progressive voices to come to the fore.
While we’ve been debating the merits of this progressive pact in public, the Conservatives and Ukip have, quietly, formed an alliance of their own around Zac Goldsmith. In this regressive alliance, the right is rallying around a candidate who voted to pull Britain out of Europe against the wishes of his constituency, a man who shocked many by running a divisive and nasty campaign to be mayor of London. There’s a sad irony in the fact it’s the voices of division that are proving so effective at advancing their shared goals, while proponents of co-operation cannot get off the starting line.
Leadership is as much about listening as anything else. What I heard on Wednesday was a local party that is passionate about talking to people and sharing what the Greens have to offer. They are proud members of our party for a reason – because they know we stand for something unique, and they have high hopes of winning local elections in the area.  No doubt the leaders of the other progressive parties are hearing the same.
Forming a progressive alliance would be the start of something big. At the core of any such agreement must be a commitment to electoral reform - and breaking open politics for good. No longer could parties choose to listen only to a handful of swing voters in key constituencies, to the exclusion of everyone else. Not many people enjoy talking about the voting system – for most, it’s boring – but as people increasingly clamour for more power in their hands, this could really have been a moment to seize.
Time is running out to select a genuine "unity" candidate through an open primary process. I admit that the most likely alternative - uniting behind a Liberal Democrat candidate in Richmond Park - doesn’t sit easily with me, especially after their role in the vindictive Coalition government.  But politics is about making difficult choices at the right moment, and this is one I wanted to actively explore, because the situation we’re in is just so dire. There is a difference between the Conservatives and the Lib Dems. Failing to realise that plays into the hands of Theresa May more than anyone else.
And, to be frank, I'm deeply worried. Just look at one very specific, very local issue and you’ll perhaps understand where I'm coming from. It’s the state of the NHS in Brighton and Hove – it’s a system that’s been so cut up by marketisation and so woefully underfunded that it’s at breaking point. Our hospital is in special measures, six GP surgeries have shut down and private firms have been operating ambulances without a license. Just imagine what that health service will look like in ten years, with a Conservative party still in charge after beating a divided left at another general election.
And then there is Brexit. We’re hurtling down a very dangerous road – which could see us out of the EU, with closed borders and an economy in tatters. It’s my belief that a vote for a non-Brexiteer in Richmond Park would be a hammer blow to Conservatives at a time when they’re trying to remould the country in their own image after a narrow win for the Leave side in the referendum.
The Green party will fight a passionate and organised campaign in Richmond Park – I was blown away by the commitment of members, and I know they’ll be hitting the ground running this weekend. On the ballot on 1 December there will only be one party saying no to new runways, rejecting nuclear weapons and nuclear power and proposing a radical overhaul of our politics and democracy. I’ll go to the constituency to campaign because we are a fundamentally unique party – saying things that others refuse to say – but I won’t pretend that I don’t wish we could have done things differently.

I believe that moments like this don’t come along very often – but they require the will of all parties involved to realise their potential. Ultimately, until other leaders of progressive parties face the electoral facts, we are all losers, no matter who wins in Richmond Park.


Caroline Lucas is the MP for Brighton Pavilion.